DALLAS — Standard & Poor’s revised its outlook on two regional medical centers in South Texas border communities citing improving financial conditions.
Analysts raised the outlook on the Hidalgo County Health Services Corp. to positive from stable on four series of bonds issued on behalf of the Mission Regional Medical Center due to “recent improvements in profitability and good growth in unrestricted liquidity, coupled with a solid increase in patient volumes in fiscal 2007.”
Standard & Poor’s also affirmed its BBB rating on the roughly $45.3 million of debt outstanding from the four series of bonds.
“Given the two-year track record of Mission’s favorable financial results, we expect a higher rating with continued profitability and growth in unrestricted liquidity,” said Standard & Poor’s credit analyst Kevin Holloran.
He said the agency would need to see another year with “a little more of everything improving” before the rating on the Mission Regional Medical Center would be upgraded to BBB-plus or possibly even the A-minus category.
The rating service also revised the outlook for the Weslaco Health Facilities Development Corp. to stable from negative on Series 2002 hospital revenue bonds issued for the Knapp Medical Center.
Analysts said the change is a result of the center’s stabilized and improved financial results. Standard & Poor’s also affirmed the BBB-plus rating on $18.6 million of debt outstanding.
The center’s strong balance-sheet metrics, including 237 days of cash on hand and low leverage at 32%, are reflected in the rating. Some mitigating factors include a “more constrained payer mix,” and the center’s relatively small size and historically erratic operating income levels, according to analysts.
“The stable outlook reflects stabilized and positive operations in fiscal 2007, after two years of significant operational losses,” Holloran said. “A higher rating will be possible if Knapp can continue to produce consistent levels of profitability over a longer timeframe.”
Holloran also said the general growth of the South Texas area has helped the medical centers, “in sort of a rising-tide-floats-all-boats mentality.”
He added that the medical centers also see an uptick in volume of patients during the winter months as many folks like to vacation in South Texas during that time.
The 289-bed Mission Regional Medical Center is roughly 25 miles west of the 233-bed Knapp Medical Center. Both centers are less than 10 miles north of the Rio Grande and the border with Mexico.